in which taxes would not have been increased and where capital accumulation
therefore would have been higher.
In another model by Galor and Moav (2004), it is demonstrated that in the early stage of modern economic development, high inequality encourages growth as the rich have a higher propensity to save, whereas at later stages high inequality may discourage growth as human capital becomes increasingly important and high inequality may be an impediment to human capital accumulation
Individual human capital can be divided into skills in final good production ([H.sub.Y]), school attendance ([H.sub.H]), networking for social capital accumulation
([H.sub.S]), and conducting R&D ([H.sub.R]), in a division similar to that of Lucas (1988), used to differentiate between human capital allocated to the final good and to schooling, and also used in Dinda (2008).
This evidence points to the drop in investment and the resulting slowdown of capital accumulation
as the main causes behind the loss of potential GDP.
The notion of property rights will be represented by the variable giving of land titles to the poor while capital accumulation
will be represented by the access to credit market.
That means that China is beginning to "rejoin the human race" as capital accumulation
meets scarcer labor and growth slows.
Therefore, capital accumulation
and growth would be faster in an economy without perfect insurance than in one with perfect insurance.
The capital accumulation
rate decreased in all countries, while unemployment; the ratio of financial income to the share of operating surplus for NFBs; the ratio of operating income of NFBs to operating surplus of the entire economy; dividend and interest income as a share of total household income (renters household income share); renters' share of NFBs; renters' payments over operating surplus of NFBs; and the ratio of operating surplus of NFBs divided by the operating surplus of the entire economy all increased substantially.
So the contribution of physical capital accumulation
increased from 45 percent in the first period to 69 percent in the second period.
Consequently, we extend the benchmark model to include spillovers in the human capital accumulation
STEP 1: IDENTIFY INSURANCE/ CAPITAL ACCUMULATION
This paper studies how optimal wage tax conclusions from the classic two-period life cycle model of human capital accumulation
are affected by endogenizing the number of taxpaying workers.